Examination of the relationship between interest and economic growth in the context of the McKinnon Shaw Hypothesis: The case of Turkey

In this study, the relationship between interest and economic growth for Turkey was examined within the scope of the Mckinnon Shaw hypothesis Dec. 2005Q4-2020Q4 based on the period Mckinnon Shaw hypothesis explaining the relationship between interest rates and economic growth to investigate the validity of the causality between variables in order to determine the direction of the vector error correction model (VECM) Granger causality method were investigated. According to the results of the vecm Granger causality analysis, a positive decoupled causality relationship between interest rate and economic growth was determined. In addition, total savings and total investment variables were included in the analysis. A positive single causal relationship between total savings and real interest rate has been determined. A positive one-way causal relationship was found from total investment to total savings. A positive double causal relationship between total investment and economic growth has been achieved. In addition, a positive bicausality decoupling was found between economic growth and total savings. The co-unification relationship between series was deconstructed by Engle Granger (1987) and it was deconstructed that there is a counification relationship between series. According to Engle Granger Cointegration long term results, it was found that the real interest rate, total savings, total investment have a positive relationship with economic growth. In the results obtained in short term analysis, the term error correction is negative and meaningful. This supports long term analysis, indicating that short-term deviations will disappear after approximately 4.5 months. Therefore, it was concluded that the Mckinnon and Shaw hypothesis is valid for the Turkish economy during the determined period.